The city's effort to discourage old-fashioned trash and encourage recycling and composting seems to be going well, almost too well, with more commercial customers trimming their loads of landfill-bound garbage.
But less trash also means less revenue for the city's Refuse Fund, which in turn means that city residents and businesses may soon have to pay higher rates to get their trash picked up. City staff has proposed a 6 percent hike for residential customers and a 9 percent increase for commercial ones.
The City Council Finance Committee members struggled with the irony Tuesday night as they brainstormed ways to close a $6.7 million deficit in the Refuse Fund, a budget hole the committee learned about in May.
The options, which Councilman Larry Klein called "an interesting collection of bad alternatives," did not sit well with committee members, however.
In addition to rate increases, staff proposed budget fixes including charging more for landfill use; closing the city's compost and recycling facilities earlier than planned (a move that would send the city's trimmings and recyclables to the SMaRT Station in Sunnyvale); and shifting street sweeping from weekly to biweekly.
Committee members, reluctant to raise rates, asked the Public Works Department for more information about the alternatives and a larger menu of possible cuts.
Councilman Greg Scharff said the department should consider eliminating jobs.
The budget gap can partially be attributed to the success of the city's Zero Waste program, which promotes recycling and composting and gives residents incentives to throw away less trash. The program, which the council instituted in 2004, has helped Palo Alto increase the percentage of local waste diverted from landfills by about 15 percent, to about 78 percent.
But the existing rate structure is also hurting the city's bottom line. As green-minded residents trade their 32-gallon trash carts for 20-gallon "mini-cans" and in the process slash their monthly rates from $31 to $15, the city's revenues have plummeted.
Recycling, meanwhile, is free.
Scharff called the city's rate structure "completely unsustainable — it's crashing and burning."
"Zero Waste is equaling zero dollars and that's the problem," Scharff said.
Scharff said he would rather keep the city's landfill-diversion rate at 78 percent than strive to attain 90 percent if the higher goal means higher costs and a lower quality of life for city residents.
Meanwhile, the city is trying to prevent future budget surprises in the Refuse Fund. Solid Waste Manager Rene Eyerly said Tuesday the model staff used to project refuse revenues was "outdated" and "simplistic." Staff has been working with a consultant since last fall to devise a more sophisticated and accurate forecasting model, which is now being finalized, she said.
The revenue drop is not simply a problem that could affect city services. The gap needs to be remedied because of a state contract related to the landfill.
The landfill, which is more than 98 percent full, is scheduled to close between 2012 and 2014, based on volume in the landfill and when the dump is deemed full. Palo Alto is required by its state landfill-operations permit to keep more than $6 million in reserves to close the landfill.
The revenue shortfall is threatening to bring the reserve down to almost zero, which would put the city in direct violation of its contract, Public Works Director Glenn Roberts said.
"We absolutely have to take some initiative now to deal with this either through rate increase or expense reductions, knowing full well that we'll be going through a study and coming back a year from now with some major changes in this regard," he said.
In her report, Eyerly attributed the shortfall in the Refuse Fund to two factors in addition to the Zero Waste program: a reduction in customer sales caused by the ongoing recession; and city policies that include more capital spending and a ban on commercial waste at the city's landfill near the Baylands.
The committee took no action Tuesday, but Klein said he was bothered by the idea of changing the rate structure for two years in a row — this year and next, after the staff completes its study of rate levels. The city also raised refuse rates by 17 percent in June 2009.
Klein suggested deferring rate changes for a few more months, when more data and a better forecasting model are available.
Scharff said he opposes reducing the level of street sweeping, a service reduction that could increase water pollution in the baylands and in local creeks.
"I'm troubled by the fact that we're substituting one environmental good for another," Scharff said. "What we're saying is Zero Waste takes precedence to protecting the Bay."
The committee is scheduled to resume the discussion July 20.
'Zero Waste is equaling zero dollars and that's the problem.'
— Palo Alto Councilman Greg Scharff